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USDCAD High Probability of a Trend Change to a Downtrend
11/7/2022 2:08 PMAgainst the backdrop of poor macroeconomic statistics from the US and investor optimism about the Canadian economy, the USD/CAD pair is trying to break through the key trend support of 1.3500.
Last week, data on the US and Canadian labor markets were published. The increase in the number of employed in the non-agricultural sector in October in the United States amounted to 261.0K, which was higher than the forecast of 200.0K, and the previous value of the indicator was revised from 263.0K to 315.0K but the unemployment rate increased by 0.2% from 3.5% to 3.7%, which is a negative signal for the US Federal Reserve. With a slowdown in labor market growth and a worsening situation with unemployment, the regulator may reduce the pace of tightening monetary policy, which investors may interpret as a signal for weakening the dollar's position in the foreign exchange market.
In turn, the Canadian labor market in October showed a positive trend: employment growth amounted to 108.3K, which exceeded the forecast of 10.0K by more than ten times, and the unemployment rate remained unchanged at 5.2%, below forecast at 5.3%, which is a positive signal for the Canadian economy.
Thus, due to a multidirectional, fundamental background, the USD/CAD pair fell to 1.3500 and will probably continue to fall, thereby changing the trend to a downtrend.
The long-term trend is still up, but market participants will try to break through the key trend support around 1.3500, after which it will be possible to consider long-term sales of the instrument with the target at 1.3200. If 1.3500 is held, the long-term uptrend may be restored, with the target at the September high of 1.3960.
The medium-term trend is downward. After a test of the key resistance last week around 1.3740–1.3717, the quotes fell to the area of the target zone 2 (1.3523–1.3502), and now they are trying to break it down, after which the next sell target will be zone 3 (1.3307–1.3286), and the key resistance trend shifts to 1.3712–1.3690.
Resistance levels: 1.3735, 1.3830. | Support levels: 1.3500, 1.3200.
